The Main Features and Problems Faced by Service organisations In Essay

The Main Features and Problems Faced by Service organisations In pursuing this Technique(Banks in the UK) - Essay standardMore than 74% of the United States work force for example is employed on this sector (Li H. & metalworker L.2001).With a dramatic fall in labour cost, the cost of processing cultivation, overheads has become far more than important in the present age of advanced manufacturing technology (AMT) with direct labour representing 5%. Thus, it wherefore now appears difficult to justify the use of direct labour or direct material as the basis for absorbing overheads. alphabet was developed to overcome some of the major problems of the conventional cost accounting. The 80s witnessed an influx of look for in to this concept. Activity based costing involves the identification of the factors which cause the costs of an organisations major activities (Lewis J.R., 1993). In this pretend overhead are charged on the basis of their usage of factor causing the overhead.In th e UK and the US, information and manufacturing technology are widely used in both manufacturing and the service sector, with both sectors experiencing different gunpoint of the usage (Palmer, A.2000). The four main characteristics inherent to services provide an answer to the main problem of ABC in the service industry.... There is a strong possibility that the same enquiry would be answered just about differently by different people. 1.2 Activity based costing and the service industry in the UK (Banking Sector).By the end of the 1980s, ABC became the focal point within the realms of academic researchers, consultants and managers as a means of overcoming the disadvantages of traditional cost allocation methods. Cost accounting was limited to it s usage of one volume elegant driver (Cooper & Kaplan 1991). By 1990 initial followers of ABC in the manufacturing sector were able to reduce cost, advert opportunities for improvement and determine a more profitable product mix (Cooper & Kaplan 1991). Thus, the concept gradually foregather grounds and became popular in the manufacturing sector.In the service sector, the espousal of ABC has been relatively slow, and the concept was rarely used apart from the health and banking sector. A recent study however, by Schultz & Rostocki (2004) concluded that, the rate of adoption of ABC in service and manufacturing industry was now similar.An essential part of managing and ensuring the long term fight of banking institutions in the United Kingdom will be to configure, manage the service deliveries and their grasp of distribution processes. The financial sector in the UK, like in any another(prenominal) country is characterised with the following characteristic Banking institutions and other financial houses are price takers. This is so because the prevailing market price has to be accepted.Large come in of institutions offering the same services with none of these institutions being able to influence price. However , their actions are not negligible. As a move by institution A will trigger a whole chain of event, in the form of competitive service